On March 18, 2024, Judge Thomas M. Durkin, sitting in the U.S. District Court for the Northern District of Illinois, Eastern Division, entered a preliminary injunction order enjoining the director of the Illinois Department of Labor (IDOL) from taking any actions to enforce the “equivalent benefits” provisions of Section 42 of the Illinois Day and Temporary Labor Services Act (DTLSA). On April 3, 2024, the court stayed any further proceedings pending the appeal.

Quick Hits

• A judge of the U.S. District Court for the Northern District of Illinois entered a preliminary injunction enjoining actions to enforce the “equivalent benefits” provisions of DTLSA.
• The equal pay provisions of Section 42 of the DTLSA were not subject to the injunction and went into effect on April 1, 2024.
• On April 3, 2024, the district court stayed any further proceedings pending the appeal.

On November 22, 2023, the Staffing Services Association of Illinois and three staffing agencies initiated legal action against the IDOL in the U.S. District Court for the Northern District of Illinois, Eastern Division. The plaintiffs sought a preliminary and permanent injunction to the enforcement of the benefits provisions of the DTLSA (820 ILCS 175/5), claiming they were preempted by the Employee Retirement Income Security Act of 1974 (ERISA). Additionally, the plaintiffs sought preliminary and permanent injunctions from enforcement of the proposed “labor dispute” warning and anti-retaliation provisions in the DTLSA, claiming they were preempted by the National Labor Relations Act. Finally, the plaintiffs sought a preliminary and permanent injunction enjoining enforcement of the DTLSA’s “interested parties” provision, claiming it violated the Due Process Clauses of the United States and Illinois constitutions.

Previously, on March 11, 2024, Judge Durkin issued a memorandum opinion and order finding that the plaintiffs had made a showing of the likelihood of success on the merits in their argument that the “equivalent benefits” provisions of Section 42 of the DTLSA were preempted by ERISA. On March 18, 2024, Judge Durkin issued the preliminary injunction order, halting implementation of the benefits provision. On March 25, 2024, the IDOL filed a notice of appeal with the United States Court of Appeals for the Seventh Circuit. On April 3, 2024, the district court stayed any further proceedings pending the appeal. The current order enjoins both enforcement actions and civil actions, including the issuance of any right to sue letter related to an allegation of a violation of the benefits provisions of the DTLSA.

In his memorandum opinion and order, Judge Durkin granted in part and denied in part the plaintiffs’ motion for a preliminary injunction and ordered the parties to submit a proposed preliminary injunction order for his issuance. The judge found that a preliminary injunction would be appropriate because the plaintiffs had made a strong showing of the likelihood of success on the merits of their argument that the benefits provision of the DTLSA was preempted by ERISA, as well as showing irreparable harm to “be forced to incur the expense and burden of determining the relevant values of benefits and creating, selecting, modifying or supplementing existing ERISA plans or paying the difference.” The judge acknowledged the difficulty in ascertaining equivalent benefits and their costs and took into account that the plaintiffs were able to show that revenue was down over the same period as last year and that they could show that they lost clients as a result of the amendment to the DTLSA.

Next Steps

The equal pay provisions of Section 42 of the DTLSA were not subject to the preliminary injunction order and went into effect on April 1, 2024. These provisions provide that labor service agencies must pay temporary laborers assigned to third-party clients for more than ninety calendar days at least the rate of pay as the lowest-paid directly hired employee of the third-party client performing at the same level of seniority and the same or substantially similar work. If there is not a directly hired comparative employee of the third-party client, the agency must pay the worker at the rate of pay of the lowest-paid directly hired employee of the third-party client with the closest level of seniority.

Ogletree Deakins’ Chicago office will continue to monitor developments and will provide updates on the Illinois and Pay Equity blogs as additional information becomes available.